The much-delayed upgrade of one of London's busiest tube lines could be a year late despite the acquisition of the public-private partnership company behind the programme.

Transport for London, the capital's publicly owned transport body, has warned that the introduction of faster and more frequent trains on the Jubilee line could slip back to next year – making the project at least a year overdue. TfL said today that testing of a new signalling system had thrown up a litany of problems inherited from Tube Lines, the PPP contractor that was acquired for £310m by TfL this year.

The TfL board meeting was told this morning that London Underground could not meet the revised deadline of October 2010, which had already slipped significantly from the original target date of 31 December 2009. "LU believes that it will be some months before the system could be used in passenger service across the whole line, during peak periods," said TfL. TfL now believes that the first quarter of 2011 is a more likely delivery date.

In a bleak assessment of the project, TfL board members were told that when the new system was tested it was blighted with 750 to 1,000 minutes of delay every weekend. TfL said this was "many times worse than the current levels of service on the line". This was having knock-on effects on the training of staff, with Jubilee line drivers unable to get to grips with the new system. "It is not possible to train drivers on a system that is not working."

LU managing director Mike Brown said: "We acquired Tube Lines just a few weeks ago. Since then we've been able to work directly with the signalling contractor, Thales, for the first time, as we seek to fully understand the state of the Jubilee line upgrade and what we've inherited from Tube Lines. Frankly, what we've uncovered has confirmed our worst fears and fully vindicates the decision we took to acquire Tube Lines and take control ourselves."

The London mayor, Boris Johnson, is fighting to preserve an upgrade programme that is supposed to deliver better services on the Northern, Piccadilly and Bakerloo lines. However, TfL accounts for about a third of the Department for Transport's budget and business groups fear that the transport secretary, Philip Hammond, will be forced to choose between the upgrades and the £16bn Crossrail project.

Work on the Piccadilly and Northern lines is expected to cost at least £4bn over the next seven years. Speaking this week, Hammond said he supported the upgrades. "The tube upgrade is I think a national priority as a piece of infrastructure and because it's a national priority I hope that in my discussions with the Treasury we will be able to recognise that and work with the mayor to try to protect that programme. But it does mean that he will have to make some tough decisions around some of the other parts of his programme."